Business Council and Minerals Council are Backing Angus Taylor on Kyoto Carryover Credits
Minister for Emissions Reduction, Angus Taylor, represented Australia at COP25 in Madrid this week. In his address on Tuesday, covered on Twitter by the Australia Institute’s Richie Merzian, Taylor claimed that Australia was “on track to meet and beat” its 2030 target and pushed the case for technological solutions to reducing emissions, in other words, technology that will allow Australia to continue to export coal and gas.
The Morrison government intends to use “Kyoto carryover credits” to meet its already weak target of a 26–28% reduction in emissions by 2030 (on 2005 levels). Kyoto carryover credits are essentially an accounting loophole, based on Australia’s supposed ‘over-achievement’ on its previous weak targets. According to Angus Taylor, “Australia should be given credit where it’s due. As always, we will seek to do more where we can.” This ABC article provides a useful explainer on Kyoto carryover credits.
According to a Climate Analytics report commissioned by the Australia Institute published yesterday:
- There is currently no legal basis for the ‘carryover’ of pre-2021 units from the Kyoto Protocol for use under the Paris Agreement.
- Most of the claimed ‘overachievement’ derives directly from the fact that Australia had substantial domestic deforestation emissions in 1990.
- Using carryover credits would be “antithetical to the goals and principles of the Paris Agreement”.
And perhaps most importantly:
- Were Australia to succeed in using carryover credits in the way it has proposed, it would reduce Australia’s 2030 target from 26% to only a 14.3% reduction below 2005 emissions levels using 2018 projections (the cut is even greater under 2019 projections).
Dr Bill Hare, report co-author and head of Climate Analytics said “there is nothing to be proud of claiming credits for action that never happened under the Kyoto Protocol so that Australia can bludge off the efforts of others, nor, as the report shows, undermining the Paris Agreement by demanding legal recognition for emission units that do not belong to it.”
According to the Guardian, about 100 other countries oppose the use of carryover credits, and there are moves underway to introduce a ban into the rulebook for the Paris Agreement.
There are no shortage of critics of Australia’s plans, including Prime Minister of Fiji Frank Bainimarama, Professors Ross Garnaut and Frank Jotzo, Associate Professor Malte Meinshausen and the Investor Group on Climate Change. Professor Garnaut has said that the use of carryover credits is against the spirit of the Paris Agreement.
Notably absent among the Kyoto carryover critics are Australia’s largest companies. And perhaps this explains Angus Taylor’s confidence in Madrid. He knows that on Kyoto carryover credits, he has the support of Australia’s carbon lobby, including the Australian Petroleum Production and Exploration Association (APPEA), the Business Council of Australia (BCA) and the Minerals Council of Australia (MCA).
Throughout the Federal election this year, the carbon lobby ran a concerted campaign against the Labor party’s decision not to use Kyoto carryover credits. Predictably, they used the same arguments they’ve been using for two decades — that the ‘cost of action’ was simply too high, and Australia should use whatever means necessary to weaken our targets in order to ‘meet’ them (including in this case by shifting the goalposts). Of course any serious efforts to reduce emissions would burden the carbon lobby, who represent businesses in the emissions intensive economy — that is the point.
Below, we lay out some of the key attempts this year, by the carbon lobby and its allies, to legitimise the weakening of Australia’s 2030 emissions target:
19 March
Brian Fisher at BAEconomics, who works closely with fossil fuel industries, published research that claimed Labor’s 45% emissions target would hit the economy more than three times harder than Coalition climate policies, costing 336,000 jobs and causing an 8% drop in wages under a worst-case scenario. The Australia Institute subsequently debunked this research.
MCA CEO Tania Constable said “…a measured response is critical to reducing greenhouse emissions in a way, which does not damage the economy, destroy jobs and hurt Australian businesses and families… Using credible and verifiable international offsets along with carry-over of emission reductions from the first and second Kyoto commitment periods will be central to Australia implementing a measured response.”
1 April
Ahead of the release of the ALP’s climate policy, BCA President Grant King claimed in an opinion piece in the AFR that the BCA “had always supported responsible climate action”. Without irony, he asked “will carry-over of Kyoto over-achievement be included?”
The BCA subsequently put out a media release that claimed: “The decision not to utilise Kyoto carry-over credits is concerning. Recent modelling has demonstrated that this will have a significant impact on the rate of economic growth and ultimately the size of our economy. We strongly encourage the Labor Party to re-examine this decision in the coming weeks…”
The MCA joined this chorus via its own media release, claiming “the use of Kyoto carryover credits has long been accepted and is allowable under the Paris Agreement”.
APPEA followed suit, suggesting it would work with the Labor Party on “key elements” of the party’s Climate Change Action Plan, including “the decision to not utilise Kyoto carry‑over units, which will increase, possibly significantly, the costs to Australia of meeting any emissions reduction targets.”
Labor was also then accused by the AFR of “reigniting the carbons wars”.
2 April
In an interview on Sky News, BCA CEO Jennifer Westacott said: “We are not going to carry over the Kyoto commitments, now in the most recent modelling, that has an enormous impact on the economy.”
MCA CEO Tania Constable told the SMH: “As a major resources and energy exporter and a large country with a relatively small population, Australia needs a climate change policy which recognises the high relative emissions intensity of our economy… Labor’s commitment to use international offsets to reduce emissions is not enough in reducing the overall cost and impact of climate change measures on Australian households and businesses, especially in regional communities.”
The AFR published this useful explainer of Kyoto carryover credits, including criticism from the Investor Group on Climate Change, but repeated the MCA’s claim that “the use of Kyoto carryover credits has long been accepted and is allowable under the Paris Agreement”. While technically ‘allowable’, it has only ‘long been accepted’ by some.
3 April
The BCA told The Australian that it had sought more detail from the Labor Party about its decision to abandon Kyoto carryover credits.
The AFR reported that Labor’s decision was “being raised by mining companies in particular as a concern given the resulting increase in the overall cost of abatement.”
5 April
In an interview on ABC’s The Business, MCA CEO Tania Constable said: “We want to make sure that the government includes in its overall approach carryovers that are there as a result of the Kyoto Protocol, and exceeding the Kyoto Protocol 1 and the anticipated Kyoto Protocol 2…”
11 April
The MCA published analysis that claimed “the financial cost to Australia will be at least $12.8 billion — based on Australia’s share of the carry-over units from the first Kyoto Protocol commitment period being about two per cent. Australia’s carry-over units are genuine and verified emission reductions according to international standards… It is also important to recognise that these units are legally recognised within the UNFCCC to encourage and not penalise Parties that overachieve on their emissions reduction targets.”
The SMH reported these claims, and MCA CEO Tania Constable emphasised the cost of not using Kyoto carryover credits:
“That $12.8 billion, that’s the equivalent of the Pharmaceutical Benefits Scheme. This is a really big number… We want to meet our Paris commitments, we want to make sure that we’re committed to a global and domestic climate change outcome, but let’s do it in a sensible way that allows for a least-cost approach”.
In the same article, BCA President Grant King argued that Kyoto carryover credits should be used because they were part of the climate agreement that business supported and expected to be applied. King said: “You just can’t keep changing the rules… This particular interpretation (banning the use of Kyoto credits) is a huge additional impost on the economy… I don’t think there should be any debate about that. It’s a huge additional cost. So the rules were set on how we’re going to achieve the [emissions reduction] target. Why would we penalise early action? Let’s celebrate the fact that our economy has done extraordinarily well on this particular issue”.
14 April
The AFR reported that APPEA and the MCA had “got their hackles up, demanding that Labor follow the government — and the Ukraine — in using carryover credits earned by overachieving against Australia’s soft 2020 Kyoto targets.”
18 April
The SMH repeated Brian Fisher’s claims and reported that “the Minerals Council of Australia has been highly critical of Labor’s target, given it will not use “carry-over credits” from the Kyoto agreement”.
26 April
In a Twitter exchange, APPEA CEO Andrew McConville said “to deny us the use of those savings is to dent us low cost abatement opportunities. Not sensible”.
30 April
After Telstra announced it was reviewing its membership of industry associations including the BCA, BCA CEO Jennifer Westacott told the AFR that it was “concerning” that Labor had ruled out using Kyoto carryover credits.
2 May
At the Santos AGM, Chairman Keith Spence said the Santos board didn’t have a view on Kyoto carryover credits. On the same day, Woodside Petroleum CEO Peter Coleman showed tentative support for Kyoto carryover credits, but said not using them could be counterbalanced by access to international carbon credits.
8 May
In a media release, the MCA said it “continues to advocate a least cost approach to emissions must include the use of international offsets along with Kyoto carry-over credits’.”
9 May
MCA CEO Tania Constable told the AFR “the Australian minerals industry is still seeking answers on why Labor will not support Kyoto carry-over credits for emissions reduction… When business is already working together to develop solutions to Australia’s emissions challenge, climate change policy needs to recognise the high relative emissions intensity of our economy and the need for lowest-cost emissions reduction.”
Caltex became the first member to break ranks with the BCA, when its Chairman Steven Gregg declared at its AGM that the Caltex board does not support the use of Kyoto carryover credits.
19 September
At the AGL Energy AGM, Chairman Graeme Hunt said the AGL board “didn’t have a view” on Kyoto carryover credits. He also said that he didn’t think lobbying by industry associations was “meaningful”.
20 September
In an interview on ABC’s The Business, BCA CEO Jennifer Westacott defended the use of Kyoto carryover credits:
Rachel Pupazzoni: You’ve talked about Paris, I just wanted to check, does the BCA support the use of Kyoto credits towards that Paris?
Jennifer Westacott: Yes, we do because we believe that you’ve got to reward early action. And why wouldn’t you try and reward early action taken by businesses. But these are things that are sorted out as part of the negotiations. It’s a legitimate provision of the Paris Agreement and as we go forward, those sorts of provisions will be negotiated as countries renew and update the Paris obligations.
23 September
The AFR reported that BHP CEO Andrew Mackenzie said the use of Kyoto carryover credits was “legitimate”. The BCA and MCA’s support for Kyoto carryover credits was referred to in the same article. BHP is a member of the BCA’s Energy and Climate Change committee, and incoming BHP CEO Mike Henry has been Deputy Chair of the MCA for several years.
26 September
In an announcement to the ASX in response to a shareholder resolution filed by ACCR, BCA member Origin Energy declared that it did not support the use of Kyoto carryover credits:
“For example, some industry associations have made comments regarding the possible use of prior period Kyoto carry over credits towards meeting future climate change targets. Origin does not support using Kyoto carry over credits for Australia to meet its current NDC to the Paris Agreement and we have reinforced this position to the relevant industry associations.”
16 October
At the Origin Energy AGM, Chairman Gordon Cairns reiterated that Origin Energy does not support the use of Kyoto carryover credits.
24 October
At the APA Group AGM, Chairman Michael Fraser said the APA board “hadn’t discussed” Kyoto carryover credits.
6 November
At the Boral AGM, Chair Kathryn Fagg said the Boral board “doesn’t have a view” on Kyoto carryover credits, “because it doesn’t affect Boral”.
7 November
At the Downer AGM, Chairman Michael Harding said the Downer board “doesn’t have a view” on Kyoto carryover credits.
13 November
At the Coles AGM, Chairman James Graham said the Coles board “doesn’t have a view” on Kyoto carryover credits.
21 November
At the BlueScope Steel AGM, CEO Mark Vasella said BlueScope Steel had “no formal position” on Kyoto carryover credits.
12 December
At the Westpac AGM, Chairman Lindsay Maxsted said the Westpac board “doesn’t have a view” on Kyoto carryover credits.
That’s an awful lot of members that don’t have a view on Australia’s 2030 emissions target.
So who does the BCA really speak for?
The BCA says it advocates, ‘on behalf of the business community and the Australians they employ’, and many accept this at face value. However, there are real questions as to whether the policies the BCA advocates for are actually the consensus view of member companies. This disparity has been reported before; in May, the AFR reported that “none of the 18 BCA members contacted by AFR Weekend endorsed the statement that Labor’s 45 per cent emissions reduction target would be “economy wrecking”. In the past the peak business lobby has struggled to reconcile the interests of energy-intensive companies and others among its membership.”
Further evidence of a lack of consensus is emerging.
Overnight, the Carbon Markets Institute published its Annual Climate Policy Business Survey: an overwhelming 76% of businesses do not support the use of Kyoto carryover credits. Like the BCA, Carbon Markets Institute members include AGL Energy, ANZ, BHP, CommBank, Macquarie, Orica, Origin Energy, South32, Suncorp, Telstra, Wesfarmers, Westpac and Woodside Petroleum.
Privately, at least ten other BCA members have confirmed to ACCR that they do not support the use of Kyoto carryover credits.
Serious questions must be raised about the governance of industry associations by member companies, if advocacy on such an important issue is determined without consultation.
While Angus Taylor may well lose the fight for Kyoto carryover credits in Madrid, it’s clear that Australia’s largest emitters will continue to “negotiate loopholes and avoid raising their ambition”.
